Bombardier: Covid-19 impact on production evident in Q2 results
Bombardier reported revenues of $2.7bn the second quarter, citing the impacts of the Covid-19 pandemic to be largely responsible for lower production rates and reduced activity the company said yesterday (August 6th). The OEM announced its financial results for this year’s second quarter, in which it reported delivery of 15 less business aircraft (20 jets) compared with the same period in 2019 (35 jets).
Bombardier began the third quarter with liquidity of approximately $3.5bn. That included $1.7bn cash , access to the undrawn amount of $738m on Transportation’s revolving credit facility as of June 30th, and the new $1.0bn senior secured credit facility announced on July 22nd, 2020 and expected to close in the third quarter.
Adjusted EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) loss and adjusted EBIT (Earnings before Interest and Tax) loss were $319m and $427m, respectively. The OEM said these results reflect an additional charge of $435m at Transportation, largely related to engineering, certification and retrofit costs associated with a number of projects. At Aviation, earnings were lower year-over-year primarily as a result of disruptions caused by the global Covid-19 pandemic.
Free cash flow usage and cash usage from operating activities were $1bn for the quarter. Bombardier said this was better than anticipated as the company resumed operations faster than expected. Overall, the impact on free cash flows of the Covid-19 pandemic during the quarter is estimated at $700m – $900m.
Bombardier noted while it is seeing some early encouraging trends in end markets, including new interest in private air travel and the enhanced safety it provides, the continuing uncertainty surrounding the duration of the pandemic and the shape of the recovery continues to prevent it from providing financial guidance. However, based on Bombardier backlogs and the near-term production and delivery outlook, it currently expects business activity to gradually recover in the second half of the year with improving cash usage in the third quarter and with the seasonal release of working capital in the fourth quarter.
“Bombardier continues to take the right actions to manage the impact of the ongoing public health crisis while protecting the business for the long-term,” said Éric Martel, President and Chief Executive Officer, Bombardier Inc.
“We begin the second half of the year with our global operations safely and successfully resumed and our production rates and workforce realigned to current market conditions and customer requirements. We’ve also improved our liquidity position with solid cash management, cost reduction actions and a new secured credit facility, providing additional flexibility, as we work to address our balance sheet challenges and close the sale of Bombardier Transportation and our aerostructure business.”
Meanwhile, on July 31st, the European Commission provided conditional approval of the sale of Bombardier Transportation to Alstom. The two firms continue to work together to obtain the remaining approvals and complete the Works Councils consultations required prior to executing the sale and purchase agreement, Bombardier said. The Montreal-based OEM expects the sale of its aerostructure business to Spirit AeroSystems to close this autumn.